Most Read Contributor in New Zealand, September 2016
This article was first published in the Otago Daily Times on
4 March 2011.
The Financial Markets (Regulators and KiwiSaver) Bill emerged
from the select committee a more balanced and effective piece of
legislation, Chapman Tripp partner Roger Wallis said yesterday.
"The committee has pulled some of the teeth the original
Bill gave the Financial Markets Authority [FMA] but has sharpened
the FMA's bite in other areas - particularly in relation to
unsolicited low-ball offers."
The issue of low-ball offers came to light over the Christmas
period when Bernard Whimp approached shareholders in seven major
NZX-listed companies with offers well below market value.
Shareholders in Fletcher Building, Telecom, Nuplex Industries,
Guinness Peat Group, Contact Energy, Fisher and Paykel Appliances
and Vector were targeted by Mr Whimp, who offered as little as 50%
of the shares' value.
While the offer was not illegal, commentators said it targeted
vulnerable investors during a time of financial stress, when
advisers were on holiday.
Mr Wallis said the select committee used the chance created by
the Bill to deal with the issue of unsolicited low-ball offers.
The committee's solution included a regulation-making power
in the Act to allow rules to be set for unsolicited offers, such as
requiring the market price be quoted or a fair estimate of value
for an unlisted security, and to require a "pause period"
before acceptances could take effect.
The Act would also require a warning from the FMA to be
published on the website of anyone making low-ball offers or, where
there was no website, in the offer documents.
"The new obligations will be given teeth by the inclusion
of civil remedies to allow restraining or corrective orders to be
made by the FMA and civil penalties and compensation to be sought
from the court for offerer breaches," he said.
Commerce Minister Simon Power said the Bill made changes to the
functions, duties and powers of regulatory bodies in order to
restore investor confidence in New Zealand's financial
The Bill addressed key recommendations of the Capital Market
Development Taskforce, issues raised during the financial crisis
and the failures of some finance companies, and concerns around the
KiwiSaver regulatory environment.
The Bill gave the FMA the power to exercise investors'
rights of action in the public interest but ensured individuals
could opt out if they wished.
It also allowed regulations to be made to prevent products being
structured to avoid being supervised by the FMA, Mr Power said.
Kepler Group principal Peter Smith said the Bill tied up all of
the actions financial advisers were being required to do under the
Financial Advisers Act and the Financial Service Providers Act
regarding registration and the code of conduct, which came into law
on July 1.
"Basically, it gives the Securities Commission the right to
play God," he said.
The Bill had been brought into closer alignment with the Search
and Surveillance Bill and would allow the FMA to search a thing or
a vehicle - including aircraft, trains, ships and bicycles - in
addition to a place.
The information in this article is for informative purposes
only and should not be relied on as legal advice. Please contact
Chapman Tripp for advice tailored to your situation.
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